Tuesday February 17, 2015

Home Aloan – Mortgage Approvals On Rise

Island based banks are reporting a marked increase in mortgage approvals during the first two months of this year, with one local branch revealing that they rubber stamped more home loans in January than during the whole of 2014.

Much of the stimulus for this increase in lending has come from the European Central Bank, which unveiled a massive 1.1 trillion euro quantitative easing package last month. The stated aim of which is to increase the lending capacity of banks, so driving economic activity and staving off deflation.

Demand side factors are also influencing increased mortgage approvals. Lanzarote’s buoyant tourist market and relatively low property prices continue to attract the attention of investors, particularly from the UK, where a combination of favourable exchange rates and changes in pension laws have combined with the lack of other viable investment options to make overseas property an attractive proposition.

Local mortgage deals are also alluring thanks to the fact that the Euribor remains at record low levels, resulting in attractive repayment rates of under 3%.

So has there, to use that very tired old cliché, ever been a better time to buy? In truth that all depends on what happens with the interest rate, as today’s manageable mortgage can easily become tomorrow’s bank repo burden. And whilst this may all be good news for island based estate agents the whole issue of mortgage lending in the Canaries remains controversial, not least as the onset of the Crisis in 2008 prompted a swathe of repossessions across the islands.

It also remains to be seen if QE and more relaxed lending criteria will solely benefit affluent overseas buyers or whether it will extend to local residents, many of whom have experienced a sharp fall in income in real terms over the last six years.